Though they only sell the power to the Electricity of Vietnam Group (EVN) at less than a half of the price consumers have to pay, the generators can still secure high profits thanks to the low capital invested in projects.

For instance, Vinh Son – Song Hinh Hydropower JSC enjoyed a post-tax profit of VND345 billion, up by 13.5 percent year on year, according to the company’s financial report.

Similarly, most other hydropower generators have posted greater growth in profits than in revenue.

Ry Ninh II JSC, for example, posted an 88-percent growth in revenue in 2011 against a year earlier, while the growth for profit is as much as 133 percent.

Meanwhile, Mien Trung Power Investment and Development’s profit grew by 23 percent in 2011 compared to 2010, while the figure for revenue is only 12 percent. Nam Mu Hydropower JSC enjoyed a profit growth of 88 percent, and 34 percent for revenue growth.

Lucrative profits

One of the most crucial factors contributing to the whopping profits of hydropower generators is the low cost price, analysts said.

“Without the huge loans borrowed from banks, whose interest expenses account for a relatively large amount of profits, the players in the hydropower generating sector could post even bigger profits,” an expert said.

An example of this is the case of Song Ba Hydropower JSC, whose financial report audited on February 16 showed that the total revenues the company earned from selling electricity last year was around VND201.6 billion, while the total cost price was only VND74.6 billion.

This means Song Ba reaped a total profit of VND127 billion, or 170 percent of the cost price.

However, with the company having to earmark VND72 billion to clear loan interests, plus losses worth VND14.4 billion thanks to the exchange rate difference, and other expenses, the post-tax profit of Song Ba is only VND32 billion.

Figures from the audited financial report of Can Don Hydropower JSC also show that the company earned VND287 billion in revenues from the cost price of only VND91.7 billion, resulting in a total profit of VND195.3 billion, or 213 percent.

However, like Song Ba JSC, Can Don Co also had to clear a massive bank interest, and consequently enjoyed an after-tax profit of only VND90 billion.

No surprise

Economic expert Dinh The Hien said it is of no coincidence that a number of businesses have rushed to invest in the hydropower sector, even those operating in the real estate sectors such as Hoang Anh Gia Lai and Duc Long Gia Lai.

“This is because the hydropower sector has many exclusive advantages,” he explained. “For instance, they can exploit the free of charge resource of water, while the outlet for their product, which is electricity, is always secured.”

Hien said thanks to such advantages, it is no surprise to see the impressive financial results of the hydropower generators.

“The profits would be even higher without the businesses’ heavy reliance on bank loans,” he said.